Auto Insurance

AAA

DEFINITION of 'Auto Insurance'

A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Instead of paying out of pocket for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

INVESTOPEDIA EXPLAINS 'Auto Insurance'

Auto insurance premiums, or the amount policyholders pay to be insured, vary depending on: age, gender, years of driving experience, accident and moving violation history, and other factors. Most states mandate that all vehicle owners purchase a minimum amount of auto insurance, but many people purchase additional insurance to further protect themselves.
A poor driving record or the desire for more complete coverage will lead to higher premiums. However, you can reduce your premiums by agreeing to take on more risk, which means increasing your deductible.

RELATED TERMS
  1. Underinsured Motorist Coverage

    An auto insurance policy provision that extends coverage to include ...
  2. Giuseppe Morchio

    An Italian executive who became CEO of Italian automaker Fiat ...
  3. Comparative Negligence

    A principle of tort law that applies to casualty insurance in ...
  4. Premium

    1. The total cost of an option. 2. The difference between the ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Deductible

    1. The amount you have to pay out-of-pocket for expenses before ...
RELATED FAQS
  1. How are open market operations and monetary policy related?

    An aggregate limit is the maximum amount an insurance company agrees to pay to cover claims during a defined period, generally ... Read Full Answer >>
  2. How much money can Uber drivers make?

    According to the company’s own data released in May 2014, more than half of the Uber drivers operating in New York City earn ... Read Full Answer >>
  3. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  4. How does an investor compute a Seasonally Adjusted Annual Rate of Sales for an automotive ...

    The seasonally adjusted annual rate of sales (SAAR) for an automotive company can be calculated by taking the unadjusted ... Read Full Answer >>
  5. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... Read Full Answer >>
  6. Why is product differentiation important in today's financial climate?

    Product differentiation is essential in today's financial climate. It allows the seller to contrast its own product with ... Read Full Answer >>
Related Articles
  1. Home & Auto

    The History Of Insurance

    The first written policy appeared in Hammurabi's Code. Find out how it evolved from there.
  2. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  3. Budgeting

    Free Car Payment Insurance: What's The Catch?

    Many dealers are offering payment protection plans on new cars. Are they right for you?
  4. Home & Auto

    Wheels Of A Future Fortune

    Buy a quality car without driving your expenses through the roof.
  5. Options & Futures

    Top Tips For Cheaper, Better Car Insurance

    Accident, theft, vandalism - make sure your coverage will protect you when you need it most.
  6. Personal Finance

    How To Get The Best Price On A New Car

    Find out tips that'll save the haggling and get you the best price on a new car.
  7. Insurance

    The True Cost Of Owning A Car

    Driving is often the most convenient way to get around, but it'll cost you.
  8. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  9. Markets

    What Is the Pharmacy Benefit Management Industry?

    PBMs, acting as third party administrators and negotiators, are essential to facilitating transactions between the moving parts of the healthcare industry.
  10. Insurance

    Why Is Health Care So Expensive In The Us?

    The U.S. is the world leader in only one area of health care: costs. Why is it so hard to rein in these expenses?

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!